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NYU Stern Asks "What Does the Future Hold?" at Market Pulse Event

As the Dow hits records lows, consumer confidence continues to wane and the Fed crafts plans to stave off a Depression-like era, Dean Thomas Cooley moderated a discussion with industry, media and academic thought-leaders to analyze, and offer solutions for, the current financial crisis.

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The event was part of NYU Stern's "Market Pulse" series, introduced in fall 2007 by Dean Cooley to tackle pressing global issues affecting business and society.

The panel included Dennis Berman, Wall Street Journal deputy bureau chief for Money and Investing; Mark Patterson (MBA '86), chairman and co-founder of MatlinPatterson Global Advisors LLC; Nouriel Roubini, Stern professor of economics and international business; and Lawrence White, deputy chair of Stern's economics department and former member of the Federal Loan Home Bank Board.



Dean Thomas Cooley: "We're a long way from a Great Depression."

Referencing the current approximate 0.5 percent job losses versus the 23 percent job losses experienced during the Great Depression, Dean Cooley believes we are a long way from a second great Depression. To reinstill confidence in the markets, he cites the predictability and consistency that Alexander Hamilton knew the people needed from government in a tough economy, which he believes we have not seen from the US government to date.

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Dennis Berman: "Wall Street is out of touch."


The infusion of capital into the market, he says, will not cover industries such as the auto industry, and banks and the economy have not begun to process what will happen with credit card debt and auto lending. He predicts a possible 25 percent default rate for junk rated firms. Berman suggests that Wall Street is out of touch, and along with Washington, live in another world. Bankers are asking, "What can we do for the shareholders? What can Washington do for me?"

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Mark Patterson: "All taxpayers are distressed investors."


With the Fed's bailout, all taxpayers are now distressed investors, he says. Patterson argues that the government has been negligent on regulation—fast asleep at the switch. Now the government and banks have moved from 100 percent gullibility to asking every question, but not acting. He also expresses concern with the FDIC, which has just $43 billion to cover $4.5 trillion insured funds, as well as the unregulated credit swap default market.

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Professor Nouriel Roubini: "We are entering a long, protracted recession."


Nicknamed "Dr. Doom" for his dire but prescient economic forecasts, Roubini believes that the US is in its worst financial crisis since the Great Depression, and the country is entering a prolonged and protracted recession, which he predicts will last about 24 months. He touched on the lack of confidence in the markets and the skepticism that is fueling a global financial meltdown.

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Professor Lawrence White: "It's all about leverage."

When the bubble burst after the technology boom and stock market value decreased by $7 1/2 trillion between December 1999 and 2002, the financial sector handled that. The losses were absorbed, mainly by households, in non-leveraged forms such as mutual funds, pension funds and 401Ks. Today, the $4-6 trillion loss in housing value will again be absorbed mostly by households. But because mortgages are highly leveraged, some of that loss — perhaps $1 to $1-1/2 trillion — has spilled into the financial sector, which (again, because of high leverage levels) has been tied into knots and has not been able to absorb the loss. These mortgages losses by households will affect future spending patterns, retirement and overall consumption, White predicts, and asks if such leverage in the household sector — as well as in the financial sector more generally — should be continued.

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